Tips to Combat Burnout

March 3, 2021

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Denise and Chris Arand

Denise and Chris Arand

Executive Vice Presidents/Financial Strategists

2173 Salk Ave
#250
Carlsbad, CA 92008

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March 1, 2021

How to Find Your Net Worth

How to Find Your Net Worth

Usually when we think of net worth we imagine all the holdings of a wealthy tycoon who owns several multi-million dollar businesses.

Net worth is just a balance sheet of a person’s assets and liabilities, not unlike the balance sheets used in business. You also have a net worth, and it’s important to know what it is.

Calculating your net worth is simple. First, you’ll want to tally up all your assets. These would include:

  • Personal property and cars
  • Real estate equity
  • Investments
  • Vested retirement plans
  • Cash or savings
  • Any amounts owed to you
  • Cash value of life insurance policies

Next, you’ll calculate your liabilities (what you owe someone else). These would include:

  • Loans
  • Mortgage balance
  • Credit card balances
  • Unpaid obligations

Your total liabilities subtracted from your total assets equals your net worth.

The number could be positive, or it could be negative. Students, for example, often have a negative net worth because they may have student loans but haven’t had a chance to build any personal assets.

It’s important to realize that net worth isn’t always equal to liquid assets. Your net worth includes non-liquid assets, like the equity in your home.

Measuring your net worth regularly can be a strong motivation when saving for the future—it can mark progress toward a well-reasoned financial goal.

When you’re ready to put together a personalized strategy based on your net worth and (more importantly) your future goals, reach out! We can use your current net worth as a starting point, while keeping focused on the real target: your long-term financial picture.

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February 24, 2021

2 Strategies to Build Credit When You’re Young

2 Strategies to Build Credit When You’re Young

The sooner you establish your credit score, the better positioned you’ll be for financial success.

Why? Because your credit score touches every aspect of your financial life—a high score can help you obtain a lower interest rate on mortgages and car loans, insurance payments, and even your rent!¹ That can help free up more cash for building wealth.

So, where do you start?

Apply for a credit card… and then use it responsibly! Credit cards are excellent tools for building your credit history. If you attend a university, you might be able to score a student credit card. However, just remember that credit cards are not free money. The less you use your credit card, the higher your credit score. Choose a few recurring expenses, and limit your credit card usage to those. Then make sure you pay off the balance every month, on time.

Use automatic payments on all your debts. Missing payments on your debt obligations can torpedo your credit score. It’s absolutely critical to pay on time for your credit card bill, student loan payments, and anything else you owe.

Consider automating all of your debt payments. It’s a simple, one-time move that can steadily reduce your balances and help boost your credit score.

As you build your credit history, you’ll be able to apply for credit in larger amounts, and you may even start receiving pre-approved offers. But beware. Having credit available is useful for certain emergencies and for demonstrating responsible use of credit—but you don’t need to apply for every offer you receive!

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February 8, 2021

3 Steps to Reduce Debt with Limited Income

3 Steps to Reduce Debt with Limited Income

Is your income holding you back from paying down debt?

It may feel like necessities such as housing, groceries, and transportation are consuming your cash flow. So how can you pay down debt if you feel like you’re struggling to put food on the table?

Reducing debt with a limited income is certainly a challenge. But if you know the right strategies, it’s an obstacle that you can work to overcome. Read on for tips that can help you pay down debt, regardless of how much you earn.

Budget debt payments first. The next time you sit down to budget, start by allocating money for reducing your debt. It should be your number one priority. Then, budget for essential living expenses like housing, utilities, and groceries. If you need more cash flow, cut down on non-essential spending like dining out and purchasing new clothes.

Start a side gig. If cutting expenses alone doesn’t free up enough cash, explore ways to make more money. That doesn’t always mean starting a second job—after all, this is the golden age of side gigs! Here are just a few hustle ideas for your consideration…

■ Resell books, clothes, and shoes you might pick up from the thrift store on eBay ■ Rideshare or deliver groceries and food ■ House sit, baby sit, or pet sit for friends and neighbors

Ultimately, your ability to earn income is only limited by your creativity in solving problems. What other opportunities are there for you to help others and earn extra income?

Make more than minimum payments. Your debt will linger if you make only minimum payments. That’s because minimum payments are nearly erased by interest. You make a payment, but the interest may put you almost right back where you started.

Instead, choose one debt to eliminate at a time. You should start with the one with the smallest total balance or the highest interest rate. Keep making the minimum payments on your other debts, and target that one debt with the rest of your available financial resources. Once it’s gone, choose the next smallest balance. Rinse and repeat until your debts are gone.

The biggest takeaway is that if you’re working with a limited income, paying off debt has to become your number one financial goal. Devote as much of your budget towards it as possible and increase your earnings if you have to. But it’s well worth the effort—once your debt is gone, you’ll have significantly more income for building real wealth!

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February 3, 2021

Strategies for Coping With Medical Bills

Strategies for Coping With Medical Bills

What’s your strategy for paying medical bills?

It’s a question anyone serious about protecting their finances must answer. Afterall, medical expenses are the number one cause of bankruptcy in the country.¹

But there are resources at your disposal. Read on for some strategies to help you lighten the financial burden of medical bills.

Review your bill for mistakes. Somewhere between 30% to 80% of medical bills contain errors.² Check every bill you receive for any mistakes and report them immediately. You don’t need to pay for medical services you didn’t use!

Negotiate a payment plan. The scary price tag on your medical bill isn’t always final. Hospitals are sometimes willing to negotiate a lower cost if they’re aware of your financial situation. Contact your healthcare provider and inform them if you’ll struggle to pay the sticker price. Then, ask for price alternatives or for a more lenient payment plan.

Avoid using credit cards for medical bills, if possible. Using credit cards to cover medical bills can be a critical blunder. Instead of paying a low interest–or maybe no interest–bill to a hospital, you may end up making high-interest payments to your credit card company.

Whenever possible, use cash to pay for medical expenses. That may mean cutting on vacations, not dining out, and holding off on purchasing new clothes until the bill is settled. (Hint: A great reason to keep an emergency fund is to pay unexpected medical bills.)

If none of these strategies make a dent in your medical expenses, consider reaching out to a professional for help. Hospitals and insurance companies sometimes have case workers who can point you towards programs, organizations, and agencies who may be able to help provide some financial relief.

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¹ “Top 5 Reasons Why People Go Bankrupt,” Mark P. Cussen, Investopedia, Feb 24, 2020, https://www.investopedia.com/financial-edge/0310/top-5-reasons-people-go-bankrupt.aspx

² “Over 20 Woeful Medical Billing Error Statistics,” Matt Moneypenny, Etactics, Oct 20, 2020, https://etactics.com/blog/medical-billing-error-statistics#:~:text=80%25%20of%20all%20medical%20bills%20contain%20errors.&text=Some%20experts%20across%20the%20web,between%2030%25%20and%2040%25.

January 18, 2021

3 Strategies to Increase Your Credit Score

3 Strategies to Increase Your Credit Score

Is your credit score costing you money?

A recent survey found that increasing a credit score from “Fair” to “Very Good” could save borrowers an average of $56,400 across five common loan types like credit cards, auto loans, and mortgages.¹ That’s roughly $316 in extra monthly cash flow!

If your credit score is anything but “Very Good,” keep reading. You’ll discover some simple strategies that may seriously help improve your credit score and increase your cash flow.

Pay your bills at the strategic time.
Credit utilization makes up a big portion of your credit score, sometimes up to 30%.¹ The closer your balance is to your credit limit, the higher your credit utilization. The lower your utilization, the less you’re using your available credit. Creditors view a lower utilization as an indicator that you’re responsible with managing your credit.

Here’s a simple way to lower your credit utilization–ask your creditors for when your balance is shared with credit reporting agencies. Then, automate your bill payments to just before that day. When credit reporting agencies review your balances, they’ll see lower numbers because you just paid them down. That can result in a lower credit utilization and a higher credit score!

Automate debt and bill payments.
Late payments for your credit card bill, phone bill, and utilities can negatively affect your credit score. If you have a habit of paying your bills late, consider automating as many of your payments as possible. It’s a convenient and simple way to make your finances more manageable and help increase your credit score in a single swoop!

Leave old credit accounts open.
So long as they don’t require a monthly fee, leave old and unused credit accounts open. Any open line of credit, even if it’s unused, increases the amount of available credit you have at your disposal. And not using that credit lowers your overall credit utilization, which can help increase your credit score.

Closing unused credit accounts does the opposite. It lowers your available credit and spikes your credit utilization, especially if you have large balances in other accounts. So if you have credit cards you don’t use anymore, leave those accounts open and hide the cards in a place where they won’t tempt you to start spending!

The best part about these strategies? You can act on them all today. Ask your creditors when your balance is shared with credit reporting agencies, then automate your deposits to go through right before that day.

When you’re done automating your payments, put your unused credit cards into a plastic bag and put them deep into your freezer. In just a few hours, you’ll have set yourself up to increase your credit score and save money!

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January 11, 2021

Simple Ways to Streamline Your Budget

Simple Ways to Streamline Your Budget

Is your budgeting system slowing your financial progress?

It’s not hard to tell if it is. Consistently ignoring your budget and failing to see results like increased cash flow and reduced debt could be indicators that something’s wrong.

Fortunately, it’s not hard to streamline your budgeting process. Here are two simple steps you can take to make your budget more manageable and more effective.

Prioritize your short-term budgeting goals
Splitting your cash flow between non-discretionary spending, savings, your emergency fund, and debt reduction may make you feel like you’ve got all the bases covered, but spreading yourself too thin might actually be diminishing the power of your money. It creates a house of cards that’s waiting to collapse!

Instead of trying to knock out everything at the same time, your budget should reflect your current financial situation. Prioritize where you put your money for the goal you’re trying to achieve. Start by putting all your excess cash flow towards an emergency fund. Then, target your debt. And finally, start directing your income towards building wealth. You’ll more effectively clear the obstacles that block the way towards financial independence.

Automate everything
What if there were a way to automatically make wise financial decisions without even thinking about it? That’s the power of automation.

Once you’ve determined your short-term budgeting goal, set up automatic deposits that move you closer towards achieving it. If you’re building an emergency fund, set up an automatic transfer from your checking account to a high-interest savings account every payday. You can do the same with essential bills and utilities as well.

Once you prioritize and automate your budget, there’s a great chance that you’ll see real progress towards your goals. And once you see progress you’ll feel empowered, maybe even excited, to keep pushing towards building wealth and creating financial independence.

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December 28, 2020

More financial tips for the new year

More financial tips for the new year

There’s nothing like the start of a brand new year to put you in a resolution-making, goal-setting, slate-cleaning kind of mood.

Along with your commitment to eat less sugar and exercise a little more, carve out some time to set a few financial aspirations for the new year. Here are some quick tips that may add up to significant benefits for you and your family.

Check your credit report
Start the new year with a copy of your credit report. Every consumer is entitled to one free credit report per year. Make it a point to get yours. Your credit report determines your credit score, so an improved score may help you get a better interest rate on an auto loan or a better plan for utilities or your phone.

Check your credit report carefully for accuracy. If you find anything that shouldn’t be there, you can file a dispute to have it removed. There are several sites where you can get your free credit report – just don’t get duped into paying for it.

Up your 401(k) contributions
The start of a new year is a great time to review your retirement strategy and up your 401(k) contributions. If saving for retirement is on your radar right now – as it should be – see if it works in your budget to increase your 401(k) contribution a few percentage points.

Review your health insurance policy
The open enrollment period for your health insurance may occur later in the year, so make a note on your calendar now to explore your health insurance options beforehand. If you have employer-sponsored health insurance, they should give you information about your plan choices as the renewal approaches. If you provide your own health insurance, you may need to talk to your representative or the health insurance company directly to assess your coverage and check how you might be able to save with a different plan.

Make sure your coverage is serving you well. If you have a high deductible plan, see if you can set up a health savings account. An HSA will allow you to put aside pretax earnings for covered health care costs throughout the year.

No spend days
Consider implementing “no spend days” into your year. Select one day per month (or two if you’re brave) and make it a no spend day. This only works well if you make it non-negotiable! A no spend day means no spur of the moment happy hours, going out to lunch, or engaging in so-called retail therapy.

A no spend day may help you save a little money, but the real gift is what you may learn about your spending habits.

Do some financial goal setting
Whether we really stick to them or not, many of us might be pretty good at setting career goals, family goals, and health and fitness goals. But when it comes to formulating financial goals, some of us might not be so great at that. Still, financial goal setting is essential, because just like anything else, you can’t get there if you’re not sure where you’re going.

Start your financial goal setting by knowing where you want to go. Have some debt you want to pay off? Looking to own a home? Want to retire in the next ten years? Those are great financial goals, but you’ll need a solid strategy to get there.

If you’re having trouble creating a financial strategy, consider working with a qualified financial professional. They can help you draw your financial roadmap.

Clean out your financial closet
Financial tools like budgets, savings strategies, and household expenses need to be revisited. Think of your finances like a closet that should be cleaned out at least once a year. Open it up and take everything out, get rid of what’s no longer serving you, and organize what’s left.

Review your household budget
Take a good look at your household budget. Remember, a budget should be updated as your life changes, so the beginning of a new year is an excellent time to review it. Don’t have a budget? An excellent goal would be to create one! A budget is one of the most useful financial tools available. It’s like an x-ray that reveals your income and spending habits so you can see and track changes over time.

Make this year your financial year
A new year is a great time to do a little financial soul searching. Freshen up your finances, revisit your financial strategies, and greet the new year on solid financial footing.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Before investing or enacting a savings or retirement strategy, seek the advice of a financial professional, accountant, health insurance representative, and/or tax expert to discuss your options.

December 16, 2020

Save Money This Holiday Season

Save Money This Holiday Season

Have you ever looked at your wish list and thought you heard a muffled scream coming from your wallet?

Inevitably, someone you love will wish for a $1,000 t-shirt or a chocolate fountain. And because you love them, you might go with it. But when December 26th rolls around and the ripped up wrapping paper settles, your wallet might feel a little battered and bruised!

The holidays don’t have to derail your financial future. Here are some straightforward tips that will help keep you on track during your annual shopping spree.

Establish a holiday budget
Entering a department store without a cap on how much you’re willing to spend is like walking into a bakery when you’re on a diet. Could you resist picking up a dozen donuts “for the family” or a couple of fresh baked loaves of bread “to make sandwiches later”?

A gift list and realistic budget can cut through the feverish fog of free-for-all shopping and impulse buys. They help you focus as you navigate aisle upon aisle of half-off sales and shiny things you don’t really need but feel like you do.

A budget can also help curtail extravagant gift requests. Telling someone that you want to buy them a gift that’s under $50 can hedge against extravagant designer clothes or the latest technological gadget.

Use cash!
Part of the power of cash is that it works in tandem with your budget. Walking into a store with no cards and just $50 limits your spending and forces you to buy only what you intended.

Cash also reduces your reliance on credit. Unleashing your cards to cover Christmas shopping is an easy way to enter the New Year with extra debt. Plus, the interest payments can add up and make your holiday shopping even more expensive in the long run. Stick with cash and save yourself the headache!

Play Secret Santa
Secret Santa has long been a staple of huge families that don’t have the time or money to get gifts for two parents, nine siblings, the in-laws, and all the cousins, nieces, and nephews. Everyone still gets a gift or two, but it helps the whole family out on their holiday budgets. Here’s how it works!

Have everyone write their names on scraps of paper. Include some highly specific gift ideas with the names. Then, put all the paper into a hat and shake it up. Have the secret Santas choose names from the hat one at a time. You get to buy gifts for ONLY the person you select!

What’s great about Secret Santa is that the mystery of the game offsets the expectation of getting tons of presents. It’s a fun way to save some extra cash!

So let chance decide who’s been naughty and nice, make a budget and list and check them twice, remember that some cash will suffice, and do some holiday shopping that won’t make you think twice (about derailing your financial dreams)!

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December 14, 2020

Good Financial Decisions You Can Make Today

Good Financial Decisions You Can Make Today

Are you afraid to fix your finances?

It’s understandable if you are! Confronting a bad spending habit or debt problem can feel overwhelming and uncomfortable.

But leaving financial issues unresolved is never a good idea. Little annoyances become serious threats if you don’t take initiative to nip them in the bud!

Fortunately, there are dozens of simple financial decisions that you can make today. Here are some of the most important ones!

Save anything you can, no matter how small
If you stash away a single dollar, you’re already ahead of the game. Half of all Americans had zero dollars (you read that correctly) saved before the COVID-19 pandemic started in 2020.¹

Anything that you’ve put away where you can’t spend it is a good thing, even if it’s a dollar. Putting money away regularly is even better. You might literally have only $1 to start. That’s fine! It’s the thought (i.e., habit) that counts, and you’ll already be closer to financial stability than many people in the country.

Don’t gamble
Americans might not be great at saving, but we sure do love playing the lottery! We spend, on average, $1,000 per year on precious tickets and scratch-offs.² Yikes! You’ll probably get struck by lightning or crushed by falling airplane debris before you win a powerball.³

If you don’t play the lottery now, don’t start. If you do play (which should fall in your budget under “fun fund”), write out how much you’ve spent on tickets vs. how much you’ve won. That’s a ratio to always keep in mind!

Eat at home
Regularly eating out can devour your income. We spend about $232 monthly at our favorite restaurants, or about $2,784 annually.⁴ There’s nothing wrong with occasionally enjoying a meal out at your favorite spot. But it becomes a problem when you’re eating out multiple times a week and using fast food as a substitute for cooking for yourself while your budget goals suffer.

So instead of hitting up a drive-thru tonight, go to your local grocery store and buy some fresh ingredients. It doesn’t have to be complicated or fancy. Ground beef and pasta or chicken curry with rice are both great (and tasty) ways to start. Check out some online recipes and try some new dishes!

Just trying these three simple things can put you ahead of the curve. They might seem small, but you’ll take a huge step forward to financial independence. Choose one of these actions and try it out today!

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¹ “Here’s how many Americans have nothing at all in savings,” Ester Bloom, CNBC Make It, Jun 19 2017, https://www.cnbc.com/2017/06/19/heres-how-many-americans-have-nothing-at-all-in-savings.html

² “Americans spend over $1,000 a year on lotto tickets,” Megan Leonhardt, CNBC Make It, Dec 12 2019, https://www.cnbc.com/2019/12/12/americans-spend-over-1000-dollars-a-year-on-lotto-tickets.html

³ “The Lottery: Is It Ever Worth Playing?,” Investopedia, Jan 27, 2020, https://www.investopedia.com/managing-wealth/worth-playing-lottery/

⁴ “Don’t Eat Out as Often,” Trent Hamm, The Simple Dollar, April 13, 2020, https://www.thesimpledollar.com/save-money/dont-eat-out-as-often/#:~:text=What%20kind%20of%20money%20are,Again%2C%20that's%20reasonable.

December 9, 2020

Setting Up Your Reindeers For Success

Setting Up Your Reindeers For Success

Dasher. Dancer. Prancer. Vixen. Comet. Cupid. Donner. Blitzen. (And Rudolph too, of course.)

This is a holiday roll-call that’s instantly recognizable: the reindeer that pull Santa’s magical sleigh. But what if things got so hectic at the North Pole (not a stretch when you’re in charge of delivering presents to every child on Earth), that when it was time to hitch up the reindeer on Christmas Eve, they were all out of order?

Prancer. Cupid. Dasher. Comet. Dancer. Vixen. Blitzen. Donner.

Hmmm, someone’s missing…. what happened to Rudolph? (Looks like he got left behind at the North Pole. In all the hubbub one of Santa’s elves forgot to review the pre-flight checklist.)

Since so much can change during the year from one crazy “Happy Holidays!” to the next, your ducks – or reindeer, that is – may not even be in a row at this point. They could be frolicking unattended in a field somewhere! And who knows where your Rudolph even is.

We can help with that. An annual review of your financial strategy is key to keeping you on track for your unique goals. Lots of things can change over the course of a year, and your strategy could need some reorganizing. I mean, did you hear about everything that changed for Prancer? (What do you call a baby reindeer, anyway?)

Here are some important questions to consider at least once each year (or even more often):

1. Are you on track to meet your savings goals? A well-prepared retirement is a worthy goal. Let’s make sure nothing drove you too far off track this year, and if it did, let’s explore what can be done to get you back on the right path.

2. Do you have the potential for new savings? Did your health improve this year? Did that black mark on your driving record expire? Changes like these have the potential to positively impact your life insurance rate, but we’d need to dig in and find out what kinds of savings might be in store for you.

3. Have your coverage needs increased? Marriage, having a child, or buying a home are all instances in which your life insurance coverage probably should be increased. Have any of these occurred for you over the last year? Have you added the new family member as a beneficiary?

If you haven’t had a chance to review your strategy this year, we can fit one in before Santa shimmies down the chimney. Which of your reindeer do you need to wrangle back into the ranks before the New Year gets going?

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November 30, 2020

4 Insights Into Paying Off Debt

4 Insights Into Paying Off Debt

On paper, paying off debt seems simple. But that doesn’t mean it’s always easy.

In fact, it can get downright discouraging if you don’t see any progress on your balances, especially if you feel like your finances are already stretched.

Fortunately, there are ways to take your debt escape plan to the next level. Here are a few insightful tips for anyone who feels like their wheels are spinning.

You must create a plan
Planning is one of the most important steps towards eliminating debt. Studies show that creating detailed plans increases our follow-through.¹ It also frees up our mental resources to focus on other pressing issues.²

Those are essential components of overcoming debt. A plan helps you stick to your guns when you’re tempted to make an impulse buy on your credit card or consider taking that last-minute weekend trip. And tackling problems that have nothing to do with debt can be a breath of fresh air for your mental health.

You have to stop borrowing
Seems obvious, right? But it might be easier said than done. Credit cards can seem like a convenient way to cover emergency expenses if you’re strapped for cash. Plus, spending money can feel therapeutic. Kicking the habit of borrowing to buy can be hard!

That’s why it’s so important to fortify your financial house with an emergency fund before you start eliminating debt. Save up enough money to cover 3 months of expenses. Then quit borrowing cold turkey. You should always have enough cash in reserve to cover car repairs and doctor visits without using your credit card.

Your lifestyle has to change
But, as mentioned before, debt can embed itself into lifestyles. You can’t get rid of debt without cutting back on spending, and you can’t cut back on spending without transforming your lifestyle.

When you’re making your escape plan, identify your highest spending categories. How important are they to your quality of life? Some of them might be essential. But you may realize that others exist just out of habit. Be willing to sacrifice some of your favorite activities, at least until you’re debt free.

You can still do the things you want
This does NOT mean that you have to be miserable. You can still enjoy a vacation, buy an awesome gadget, or treat your partner to a romantic dinner. You just have to prepare for those events differently.

Create a “fun fund” that you contribute money to every month. Budget a specific amount to put in it and dedicate it to a specific item. This allows you to have some fun every now and then without derailing your journey to financial freedom.

Debt doesn’t have to be overwhelming. These insights can help you stay the course as you eliminate debt from your financial house and start pursuing your dreams. Let me know if you’re interested in learning more about debt-destroying strategies!

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¹ “Making the Best Laid Plans Better: How Plan-Making Prompts Increase Follow-Through,” Todd Rogers, Katherine L. Milkman, Leslie K. John and Michael I. Norton, Behavioral Science and Policy, 2016, https://scholar.harvard.edu/files/todd_rogers/files/making_0.pdf

² “The Power of a Plan,” Timothy A Pychyl Ph.D., Psychology Today, Nov 17, 2011, https://www.psychologytoday.com/us/blog/dont-delay/201111/the-power-plan

November 18, 2020

The Most Important Retirement Rule

The Most Important Retirement Rule

The best way to determine your retirement target savings is to use your income.

Here’s why.

Almost nobody wants to work 40 hours a week in retirement. Not you, not me. To avoid that, you must have money at your disposal to cover expenses like food, travel, and medical bills.

But how much do you need?

There’s a 38% chance that if you retire at 65 you will live to 85, and a 5% chance that you’ll make it to 95.¹ That means you’ll need enough cash to cover at least 20 years of life with no income.

This is where your paycheck comes into play.

Aiming to save 20 to 30 times your income helps prepare you to maintain your current lifestyle into retirement. You might even have extra spending money if you’re debt free!

Plus, it forces you to scale your savings as your income grows.

Setting a goal based solely on how much you want to spend in retirement can result in lowering your savings goal. You might splurge more now, telling yourself that you’ll just live on less later. But you’re cheating your future self!

Using your income as a retirement benchmark forces you to increase your savings amount as your paycheck grows. Let’s say you make $80,000 annually and you start saving. Your goal is to stash away 20 times your income, or about $1.6 million.

After a while, you’re able to save 5 years worth of earnings, or about $400,000.

But then you get a raise! Suddenly you’re making $100,000 per year. Your retirement target shifts up accordingly to $2 million. That $400,000 you have in the bank is a hefty slice of cash, but it’s now only worth 4 years of income instead of 5.

In other words, basing your saving around your income actually encourages you to save more as your income increases.

The best thing about this method is that it focuses on the most important part of retiring—to sustain the lifestyle that you envision. Meet with a licensed financial professional to map out what that would look like for you and how much you must save to make that vision a reality.

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¹ “How Long Will Your Retirement Really Last?,” Simon Moore, Forbes, Apr 24, 2018, https://www.forbes.com/sites/simonmoore/2018/04/24/how-long-will-your-retirement-last/?sh=31a59fb37472

November 11, 2020

How Much Should You Pay For a Car?

How Much Should You Pay For a Car?

Cars will drain your wealth.

In 2019, Americans were spending about $773.40 per month on their vehicles, or $9,281 annually.¹ That’s like owning a tiny house whose value nosedives the instant you buy it!

That’s not even counting the opportunity cost of throwing that money at a car. How much could that cash grow if it were invested or saved?

That’s why you should follow this simple rule for guarding your wealth from a car.

It’s called the 20/4/10 rule, and it’s composed of three parts. Let’s explore them one by one.

Start with at least a 20% downpayment.

Committing a hefty downpayment to a car curbs how much you’ll lose in interest later down the road. It’s always best to cover as much as you can up front with cash.

Finance the car for no more than 4 years.

How long would you want to dump money into an “investment” that doesn’t grow in value? Not long! Keep your financing period short and sweet and then get back to saving for your future.

Dedicate no more than 10% of your income to car expenses.

Your cash flow is a powerful wealth building tool if it keeps, well, flowing. Don’t let a car divert it somewhere else that it won’t grow and won’t build wealth.

Remember, this is not a bulletproof strategy.

You might be facing substantial mortgage or credit card debt obligations that make it difficult to afford the car you want. It’s always a good idea to meet with a licensed financial professional before you commit to buying a new vehicle.

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November 2, 2020

Two Rules That Could Save Your Financial Life

Two Rules That Could Save Your Financial Life

Almost 70% of Americans have less than $1,000 saved.¹

That means most Americans couldn’t cover unplanned car repairs, home maintenance, or medical bills without selling something or going into debt. They’re constantly living on the edge of financial ruin.

That’s where your emergency fund comes in. It’s a stash of cash that you can easily access in a pinch. You’ll be able to pay for that blown transmission without visiting a payday lender or selling your grandma’s silverware!

But here’s the catch: Your emergency savings account won’t help you much if it’s under-funded.

Follow these two rules to ensure that your rainy day savings can withstand the storms of life.

Rule #1: Only use your emergency fund for real emergencies.

I get it. Your emergency fund is an easily accessible chunk of money. Of course it’s going to be tempting to tap into it when you’re buying a new car or planning a dream vacation.

But your rainy day savings shouldn’t fund your lifestyle. They should protect it.

Think of it like this. Your vacation fund pays for your annual beach trip. Your emergency fund covers the bill when your car breaks down on the drive home. Only touch your emergency fund for unexpected expenses and enjoy the peace that comes from being prepared.

Rule #2: Always refill your emergency fund when it’s low

Ideally, your emergency fund should be stocked with 3 to 6 months of your income at all times. That should be enough to cover the gambit from small unexpected costs to a month or two of unemployment.

Don’t be afraid to tap into your emergency savings when you face unforeseen financial hiccups. Just remember to refresh your fund when the emergency has passed. The last thing you need is to be caught in the crosshairs of another crisis without a buffer.

Don’t let a financial storm blow you off course. Prepare for your future, and start building an emergency fund now. If you follow these rules, it can help financially protect you from the challenges life will inevitably send your way.

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October 19, 2020

When Education Isn't Worth It

When Education Isn't Worth It

After room and board, a degree from a private university costs $46,950 per year.¹

A public university charges less than half that, with an annual price tag of $20,770.² That’s over double what it was in 1980 after adjusting for inflation.³ Why the sharp increase? Part of the answer is that demand has skyrocketed over the past 40 years. An information age requires knowledgeable, highly-skilled workers, and getting a degree is the traditional way of meeting those criteria. Rising demand has occurred alongside a steady decline in state funding for public education. One report found that 79% of tuition increases stemmed from such cuts.⁴

But there’s always been an assumption, despite the ballooning costs of higher education, that attending university would be worth it. Afterall, graduates almost always earn more than their peers.⁵ It’s an investment in a future income, right?

The diminishing returns of a degree
But that old model is simplistic at best. College simply doesn’t pay off for some graduates. Data demonstrates that the lowest earning college grads actually earn less than their highschool educated counterparts. ⁶ They actually lost income by going to university! It makes sense when you do the math. Going into crippling debt to get a speech and drama degree only earns you about $28,300 after graduation. ⁷ And the huge supply of highly-educated workers has put pressure on once prosperous careers. For example, more people graduate from expensive law schools in the United States than there are job openings for attorneys. ⁸ Sure, there’s 6-figure potential there if you can land a job, but you’re competing with dozens of other qualified prospects. It’s easy to see why people have become so cynical about higher education.

Simple solutions?
Overall, there are certainly times when a college degree is not worth the time and treasure. Spending 12 years at a private institution to get a doctorate in an obscure field with low pay and a brutal job market? There are probably more profitable ways to spend your time. But overall, there are numerous degrees that may still pay off; the average Bachelor’s degree is worth around $2.8 million over a lifetime. ⁹ But you must plan strategically. It all comes down to how you reduce the cost of your education and maximize your upside potential post-graduation.

Narrow your search to only include public schools in your state. Do as much research on scholarships and apply for as many as possible. Live with your parents to cut down on room and board costs. Take a gap year of work between your bachelors and masters degree. And do some research on job opportunities in the field before you get a diploma. You might decide that going into debt to become a petroleum engineer is a better investment than signing your life away to the humanities!

If you’re a parent, start planning your child’s higher education today. That will involve choosing the right schools and encouraging them to work hard and love learning. But you must also provide them with a steady financial foundation to pursue their dreams. Helping them get a degree debt-free might empower them to study their passions instead of chasing paychecks to fight off loans. There are financial products on the market designed to help you save for your child’s future, no matter what level of education they decide to pursue. Let’s schedule a time to meet and we can discuss your options in detail!

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¹ Hillary Hoffower, “College is more expensive than it’s ever been, and the 5 reasons why suggest it’s only going to get worse,” Business Insider, JunE 26, 2019, https://www.businessinsider.com/why-is-college-so-expensive-2018-4

² Hoffower, “College is more expensive than it’s ever been,” Business Insider

³ Hoffower, “College is more expensive than it’s ever been,” Business Insider

⁴ Abigail Hess, “The cost of college increased by more than 25% in the last 10 years—here’s why,” CNBC, Dec 13 2019, https://www.cnbc.com/2019/12/13/cost-of-college-increased-by-more-than-25percent-in-the-last-10-years.html

⁵ Anthony P. Carnevale, Ban Cheah, Andrew R. Hanson, “The Economic Value Of College Majors: Executive Summary,” Georgetown University Center On Education And The Workforce, 2015, https://cew.georgetown.edu/wp-content/uploads/Exec-Summary-web-B.pdf

⁶ Emma Kerr, “Is College Worth the Cost?,” U.S. News & World Report, June 17, 2019, https://www.usnews.com/education/best-colleges/paying-for-college/articles/2019-06-17/is-college-worth-the-cost

⁷ Alison Doyle, “Average College Graduate Salaries: Expectations vs. Reality,” The Balance, June 6, 2020, https://www.thebalance.com/college-graduate-salaries-expectations-vs-reality-4142305

⁸ “Occupational Outlook Handbook, Lawyers” Bureau Of Labor Statistics, Sept 1, 2020 https://www.bls.gov/ooh/legal/lawyers.htm#tab-6

⁹ Anthony P. Carnevale, Stephen J. Rose and Ban Cheah, “The College Payoff: Education, Occupations, Lifetime Earnings” Georgetown University Center On Education And The Workforce, 2011, https://cew.georgetown.edu/cew-reports/the-college-payoff/

October 14, 2020

Bankruptcy – Consequences and Aftermath

Bankruptcy – Consequences and Aftermath

If you or a loved one is at (or think you may be at) the place where you’re wondering if declaring bankruptcy[i] may be the path to take, there are several serious consequences to be aware of.

Depending on the type of bankruptcy (Chapter 7 or Chapter 13)[ii], debts may be eliminated, reduced, or restructured into a less burdensome repayment plan.

But what about the consequences that arise during the process itself, and what is the aftermath?

Before and During Filing
Before you even file there are consequences that can arise from bankruptcy proceedings: the law requires that the filer undergo credit counseling [iii] by a government-approved entity to ensure the filer understands what will take place during the process and have a chance to look at other options. If bankruptcy still seems to be the only viable option, the filer will then have to file in federal court, paying a filing fee of hundreds of dollars.[iv]

During the process, a schedule of assets and liabilities must be submitted for review by the court. That means the creditors and court will be able to look into your private financial life. Furthermore, the bankruptcy will become part of the public record, and therefore your financial details will be exposed to public scrutiny. Next, in Chapter 7, nonexempt assets will be sold by the trustee to help pay creditors. For Chapter 13, the court, creditors, and debtor will work out a repayment plan based on the financial situation of the debtor.

Discharge usually occurs for Chapter 7 within a few months, and the debtor will be free of the debts. In Chapter 13, discharge comes as a result of successfully completing the repayment plan. If the schedule of assets and liabilities is not filed in a timely manner, the request may be dismissed. If the repayment plan is not strictly followed, the court may dismiss the process and decide in favor of the creditors (who may repossess assets).

Impact on Your Credit Report
Once discharge occurs, the debtor will have escaped from the shadow of debt. However, the ghosts of the filing will remain on the credit report for several years.[v] A Chapter 13 filing will stay for seven years, while a Chapter 7 filing will remain for ten years. It should be no surprise that a bankruptcy, regardless of type, will negatively impact your credit score.[vi] However, over time if an applicant can show a good faith attempt to repay the debts, and begin to develop good credit habits, creditors may be more willing to cooperate.

Successive Filings
One important point to consider is the ability to refile. Because Chapter 7 completely erases debts, possibly with very little partial payment required if the debtor’s nonexempt assets are minimal, the debtor must wait eight years before another discharge would be granted. (One may file bankruptcy before this time, but a discharge – the actual debt elimination – would not be granted.) On the other hand, a restructuring under Chapter 13 is less detrimental to creditors, so another discharge may be granted in a bankruptcy that is filed just two years after the first bankruptcy is filed.

The concurrent and subsequent, long lasting consequences of filing bankruptcy are significant, and those who can avoid bankruptcy should certainly consider all the alternatives. If bankruptcy seems to be the only option, filers should thoroughly understand the consequences of the process before committing to that course of action.

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This article is for informational purposes only and is not intended to offer legal advice or promote any certain plans or strategies that may be available to you. Always seek the advice of a financial professional, accountant, attorney, and/or tax expert to discuss your options.

[i] https://www.uscourts.gov/services-forms/bankruptcy
[ii] https://www.nolo.com/legal-encyclopedia/what-is-the-difference-between-chapter-7-chapter-13-bankrutpcy.html
[iii] https://www.consumer.ftc.gov/articles/0224-filing-bankruptcy-what-know#counseling
[iv] https://www.nolo.com/legal-encyclopedia/bankruptcy-filing-fees-costs.html
[v] https://www.experian.com/blogs/ask-experian/removing-bankruptcy-from-your-credit-report/
[vi] https://www.moneycrashers.com/bankruptcy-affect-credit-score/

September 28, 2020

So You Want to Buy Life Insurance for Your Parents...

So You Want to Buy Life Insurance for Your Parents...

Playing Monopoly as a young kid might have given you some strange ideas about money.

Take the life insurance card in the Community Chest for instance. That might give the impression that life insurance is free money to burn on whatever the next roll of the dice calls for.

In grown-up reality, life insurance proceeds are often committed long before a policy holder or beneficiary receives the check they’re waiting for. Final expenses, estate taxes, loan balances, and medical bills all compete for whatever money is paid out on the policy.

If your parents don’t have a policy or if you think their coverage won’t be enough, you can plan ahead and buy a life insurance policy for them. Your parents would be the insured, but you would be the policy owner and beneficiary.

A few extra considerations when buying a life insurance policy for your parents:

  • Insurable interest still applies. If your parents already have a significant amount of life insurance coverage, you may find that some insurers are reluctant to issue more coverage. Insurable interest requires that the amount of coverage doesn’t exceed the potential financial loss. (In other words, if your parents already have enough coverage, a company may not want to insure them for more.)
  • Age can limit coverage amounts. Assuming that your parents are older and no longer generating income, coverage amounts will be limited. If your parents are younger and still have 20 or more years ahead of them before they retire, they can qualify for a higher amount of coverage.
  • Age can limit policy types. Certain types of life insurance aren’t available when we get older, or will be limited in regard to length of coverage. Term life insurance is a good example. Your options for term life insurance will be fewer once your parents are into their sixties. The available term lengths will also be shorter. Policies with a 30-year term aren’t commonly available over the age of 50.

How Can I Use The Life Insurance For My Parents?

Depending on the amount of coverage you buy – or can buy (remember, it may be limited), you could use the policy to plan for any of the following:

  • Final expenses: You can expect funeral costs to run from $10,000 to $15,000, maybe more.
  • Estate taxes: Estate taxes and so-called death taxes can be an unpleasant surprise in many states. A life insurance policy can help you plan for this expense which could come at a time when you’re not flush with cash.

Can Life Insurance Pay The Mortgage Or Car Loans?

It isn’t uncommon for parents to pass away with some remaining debt. This might be in the form of a mortgage, car loans, or even credit card debt. These loan balances can be covered in whole or in part with a life insurance policy.

In fact, outstanding loan balances are a very big consideration. Often, people who inherit a house or a car may also inherit an additional mortgage payment or car payment. It might be wonderful to receive such a generous and sentimental gift, but if you’re like many families, you might not have the extra money for the payments in your budget.

Even if the policy doesn’t provide sufficient coverage to retire the debt completely, a life insurance policy can give you some breathing room until you can make other arrangements – like selling your parents’ house, for example.

You Control The Premium Payments.

If you buy a life insurance policy for your parents, you’ll know if the premiums are being paid because you’re the one paying them. You probably wouldn’t want your parents to be burdened with a life insurance premium obligation if they’re living on a fixed income.

Buying insurance for your parents is a great idea, but many people don’t consider it until it’s too late. That’s when you might wish you’d had the idea years ago. It’s one of the wisest things you can do, particularly if your parents are underinsured or have no life insurance at all.

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September 23, 2020

Who Needs Life Insurance?

Who Needs Life Insurance?

Life insurance is important… or so you’ve been told.

But do you really need it? And how can you know? Let’s take a look at who does and doesn’t need the family and legacy protecting power of life insurance and some specific examples of both.

Protecting your dependants
Is there anyone in your life who would suffer financially if your income were to vanish? If so, then you have dependents. And anyone with financial dependents should buy life insurance. Those are the people you’re aiming to protect with a life insurance policy.

On the other hand, if you live alone, aren’t helping anyone pay bills, and no one relies on you financially to pursue their dreams, then you still might need coverage. Let’s look at some specific examples below.

Young singles
Let’s say you’ve just graduated from college, you’ve started your first job, and you’re living in a new city. Your parents don’t need you to help support them, and you’re on your own financially. Should you get life insurance? If you have serious amounts of student or credit card debt that would get moved to your parents in the event of your passing, then it’s a consideration. You also might think about if you have saved enough in emergency funds to cover potential funeral expenses. Now would also potentially be a better time to buy a policy early while rates are low, especially if you’re considering starting a family in the near future.

Married without children
What if your family is just you and your spouse? Do either of you need life insurance? Remember, your goal is to protect the people who depend on your income. You and your spouse have built a life together that’s probably supported by both of your incomes. A life insurance policy could protect your loved one’s lifestyle if something were to happen to you. It would also help them meet lingering financial obligations like car payments, credit card debt, and a mortgage, even if they still have their income.

Single or married parents
Anyone with children must consider life insurance. No one relies on your income quite like your kids. It’s what clothes them and feeds them. Later on, it can empower them to pursue their educational dreams. Life insurance can help give you peace of mind that all of those needs will be protected. Even a stay-at-home parent should consider a policy. They often provide for needs like childcare and education that would be costly to replace. Life insurance is an essential line of defense for your family’s dreams and lifestyle.

Business owners
No one wants to think about what would happen to their business without them. But entrepreneurs and small business owners can use life insurance to protect their hard work. A policy can help protect your family if you took out loans to start your business and are still paying down debt. More importantly, it can help offset the losses if your family can’t operate the business without you and has to sell in poor market conditions.

Not everyone needs life insurance right now. But it’s a vital line of defense for the people you care about most and should be on everyone’s radar. The need might not be as urgent for a young, debt-free single person, but it’s still worth it to start making plans to protect your future family. Contact a financial professional today to begin the process of preparing!

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September 16, 2020

A Life Insurance Deep Dive

A Life Insurance Deep Dive

We’ve explored the basics of life insurance, how it works, and what it’s for.

Today we’ll be fleshing out some concepts you might encounter as you look at your options for protecting your family. Let’s start with the different kinds of life insurance.

Different types of life insurance
Life insurance will almost always have a few basic parts—the death benefit (the amount paid to your loved ones upon your passing), the policy itself (the actual insurance contract), and the premium (how much you pay for the life insurance policy).

There’s a wide range of life insurance policies, each with their own strengths and weaknesses.

  • Term life insurance is the most straightforward form. It lasts for a set amount of time (the term), during which you pay a premium. You and your beneficiaries won’t receive any benefits if you don’t pass away during the term. This type of policy typically doesn’t feature other benefits on its own (you may be able to add other benefits with what is called a rider).
  • Whole life insurance is exactly what it sounds like. It never expires and is guaranteed to pay a benefit whenever you pass away. But it often comes with other benefits. For instance, it can include a saving component called a cash value. It usually builds with interest and you can take money from it any time.
  • Indexed Universal Life Insurance is similar to whole life insurance, but the cash value is tied to the market. The market is up? Your cash value goes up. The market goes down? Your cash value is actually shielded from loss.

Each of these types of life insurance have different strengths and weaknesses. A term policy might be right for you while a whole life policy might be better for your neighbor. Talk with a financial professional to see which one fits your needs and budget!

The right amount of life insurance
But can you have too little life insurance? How about too much? The answer to both of those questions is yes. In general, the purpose of life insurance is to replace your income in case of your passing for your loved ones and family. That should be your guidestone when deciding how substantial a policy to purchase. Typically, you’re looking at about 10 times your annual income. That’s enough to replace your yearly earnings, pay-off potential debts, and guard against inflation. That means someone earning $35,000 would want to shop around for about $350,000 worth of coverage.

Employer life insurance
This means that most employer-provided life insurance isn’t enough to fully protect you and your family. There’s no doubt that a free policy from your workplace is great. But they typically only cover about a year of wages. That’s not nearly what you need to provide peace of mind to your beneficiaries! Don’t necessarily refuse your employer-provided life insurance, but make sure that it supplements a more substantial policy.

Still have questions? Reach out to a licensed financial professional and ask for guidance! And stay tuned for next week’s article where we’ll debunk some common life insurance myths!

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before enacting a life insurance policy, seek the advice of a licensed financial professional to discuss your options.

August 31, 2020

How to Avoid Financial Infidelity

How to Avoid Financial Infidelity

If you or your partner have ever spent (a lot of) money without telling the other, you’re not alone.

This has become such a widespread problem for couples that there’s even a term for it: Financial Infidelity.

Calling it infidelity might seem a bit dramatic, but it makes sense when you consider that finances are the leading cause of relationship stress. Each couple has their own definition of “a lot of money,” but as you can imagine, or may have even experienced yourself, making assumptions or hiding purchases from your partner can be damaging to both your finances AND your relationship.

Here’s a strategy to help avoid financial infidelity, and hopefully lessen some stress in your household:

Set up “Fun Funds” accounts.

A “Fun Fund” is a personal bank account for each partner which is separate from your main savings or checking account (which may be shared).

Here’s how it works: Each time you pay your bills or review your whole budget together, set aside an equal amount of any leftover money for each partner. That goes in your Fun Fund.

The agreement is that the money in this account can be spent on anything without having to consult your significant other. For instance, you may immediately take some of your Fun Funds and buy that low-budget, made-for-tv movie that you love but your partner hates. And they can’t be upset that you spent the money! It was yours to spend! (They might be a little upset when you suggest watching that movie they hate on a quiet night at home, but you’re on your own for that one!)

Your partner on the other hand may wait and save up the money in their Fun Fund to buy $1,000 worth of those “Add water and watch them grow to 400x their size!” dinosaurs. You may see it as a total waste, but it was their money to spend! Plus, this isn’t $1,000 taken away from paying your bills, buying food, or putting your kids through school. (And it’ll give them something to do while you’re watching your movie.)

It might be a little easier to set up Fun Funds for the both of you when you have a strategy for financial independence. Contact me today, and we can work together to get you and your loved one closer to those beloved B movies and magic growing dinosaurs.

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